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U.S. Securities and Exchange Commission

Speech by SEC Chairman:
Remarks at News Teleconference Announcing Enforcement Action Against Former N.Y. State Official and Top Political Advisor


Chairman Mary L. Schapiro

U.S. Securities and Exchange Commission

March 19, 2009

Good afternoon. And thank you Attorney General [Andrew] Cuomo. This has been an excellent coordinated effort by our two agencies. We look forward to continuing to work closely together on this and other investigations.

Investments should be based on sound decisions not shady deals. It's a basic principle that was apparently rejected by the former Deputy Comptroller and Chief Investment Officer of New York's largest pension fund.

That is why today the Securities and Exchange Commission is filing charges against David Loglisci as well as Hank Morris, the top political advisor to the state's former Comptroller.

As we allege in our complaint, these two men used their influential positions to extract kickbacks from investment firms that wanted to do business with New York's Common Retirement Fund. For four years, Mr. Loglisci enticed investment managers to pay sham finder fees to Mr. Morris and other designated recipients. Yet, Mr. Morris and others who received these payments allegedly never performed legitimate finder services for the firms who made the payments. The fees were simply kickbacks.

Those investment managers who paid the fees were rewarded with lucrative investment management contracts, while those who refused to pay were denied fund business.

It was a scheme that enriched these two individuals and their friends, and at the same time, undermined the integrity of the state's investment decisions.

Over the four year period, an estimated $5 billion of the fund was invested through this corrupted process. And, it resulted in millions of dollars being pocketed by Morris and others.

Our action will seek to recover the ill-gotten gains and impose additional civil penalties.

The former Deputy Comptroller betrayed not only the trust that New Yorkers placed in him as a public official, but the trust of tens of thousands of investors who expected him to act solely in their best interests — not his own.

As the new Chairman of the SEC, I am committed to coordinated actions like today's because public pension funds are a vital component of our securities markets and the retirement security of millions of Americans. Across the country, these funds have assets of about $2 trillion and are composed of the hard-earned contributions of our public employees. The management of public pension plans affects taxpayers and the millions of state and municipal retirees who rely on the funds for their pensions and other benefits.

Those entrusted with the privilege of deciding how best to invest public pension assets and which investment professionals to hire have a strict fiduciary duty — it is a duty to make decisions based solely on the merits, and free from any conflicts of interest.

We will continue this investigation and will pursue anyone who unlawfully profited from their privileged access to the hard-earned contributions of our public employees.

In closing, I'd like to thank two individuals from our Enforcement Division — David Rosenfeld and George Stepaniuk, who led our investigation and are with me today, as well as Maureen Lewis and Joseph Sansone, who also assisted with the investigation.

Thank you.


Modified: 03/19/2009